Thursday, July 14, 2016

Unsecured Creditor Barred From Making Late Claim

Can a creditor in a chapter 13 bankruptcy case file a claim late due to ‘excusable neglect’?

In order for a creditor to have a valid interest in a bankruptcy case, they must file a claim with the Bankruptcy Court. The filing of a claim is subject to strict time limitations. Although the Bankruptcy Court may allow for the late filing of a claim under certain circumstances this does not mean that they must do so in every case. A case coming out of the Sixth Circuit is a good example of this.

Debtors filed for Chapter 13 bankruptcy in 2014 seeking to reorganize their debt and make payments according to an approved plan. One unsecured creditor filed it’s proof of claim 8 days late. The creditor cited excusable neglect and argued that they missed the claims bar date notice due to a change in staff and because debtor’s counsel failed to communicate with them. They also argued that there was no prejudice and that they should therefore be allowed to file their claim. The Bankruptcy Court agreed and allowed it.

The Bankruptcy Appellate Panel for the Sixth Circuit reversed the decision. They held that there was no statutory authority for allowing the late claim in Chapter 13 cases even though precedent existed in Chapter 7 cases. The Panel also found that no equitable relief was available because they were not permitted to create exceptions that were not provided for in the Bankruptcy Code.  It found that they could not allow the time limitation to be tolled because it was not provided for in the Code and because the creditor was provided with timely notice.

Filing for bankruptcy can be a complicated process. You should not go through it alone. Retaining a qualified attorney will only increase your chances of obtaining the relief you are seeking. Contact a Beavercreek, Jamestown and Xenia, Ohio bankruptcy attorney for a consultation today.

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